Did Perry Double Texas Budget?

Posted on
September 2, 2011

A pro-Bachmann PAC misleads viewers when it says Rick Perry doubled the size of Texas' budget from 2000 to 2010. When adjusted for inflation and population, the total Texas budget increased by 21 percent during that time. Excluding federal funds, however, state spending actually went down by 6 percent.

The ad also says the Texas governor this year is "spending more money than the state takes in." That's true, but the state is required to balance the budget. This year, the Legislature dipped into a rainy day fund and made budget cuts to balance the books.

Texas Budget, Unadjusted and Adjusted

The TV ad is the work of Keep Conservatives United, one of the many independent political action committees created this election cycle to support a single presidential candidate. The group — which formed as a "super PAC" in July and can accept unlimited donations — backs Rep. Michele Bachmann for the Republican presidential nomination.

The ad is running in South Carolina, a conservative battleground state where Perry announced his candidacy. Titled "Budget," the ad portrays Perry as a reckless spender since he became governor in December 2000 — claiming he has "doubled spending in a decade." But that's only true if you don't adjust state spending for inflation or population growth.

The pro-Bachmann PAC cites the 2000 and 2010 total state expenditure figures contained in the state comptroller's annual financial reports. Indeed, the reports cited by the group show that total state expenditures rose from nearly $45 billion in 2000 (page 243) to $90.4 billion in 2010 (page 253). But that's misleading. It ignores the fact that during that time the state's population increased by 20.6 percent (the fifth fastest in the U.S.) and inflation grew by 27 percent (a dollar in 2000 had the buying power of $1.27 in 2010).

The nonpartisan Texas Legislative Budget Board produces a report every two years called the "Fiscal Size-up" that, among other things, adjusts state spending for population and inflation. John Barton, a spokesman for the board, sent us updated figures on Texas state spending from 2000 (actual) through 2013 (estimated), the last year of the current budget cycle. We'll compare the 2000 and 2010 budget figures, since that was the basis of the claim in the TV ad.

Unadjusted for inflation or population growth, total spending did double: $49.5 billion in 2000 to $92 billion in 2010. However, the $92 billion in 2010 dollars was the equivalent of about $60 billion in 2000 dollars when adjusted for inflation and population growth, according to the budget board. That's an increase of 21 percent.

We'd also like to note here that the TV ad flashes a headline from a July 18 article in the Fort Worth Star-Telegram: "Texas spending kept rising for years with Perry as governor." But that article doesn't support the ad's claim that spending doubled under Perry. Instead, it supports our conclusion above that total state expenditures rose by 21 percent — or, as the story says, an average of 4.2 percent every two years when adjusted for population and inflation.

Fort Worth Star-Telegram, July 18: Perry took the reins in December 2000. From then until 2011, spending increased an average of 16.8 percent every two years. Once adjusted for population and inflation, that rate falls to 4.2 percent.

But that's not all. We need to consider, too, how much of that growth in spending was caused by shared state-federal services. There's only so much a state can do to restrain spending on a federal entitlement program such as Medicaid. And the state's Medicaid enrollment has grown at an even faster rate than the state's general population. Total Medicaid enrollment in Texas stood at 3.5 million at the end of 2010 — up from 1.9 million in September 2001, according to the Texas Health and Human Services Commission website.

Our analysis of Texas budget data cited by Keep Conservatives United showed that the federal government was the fastest-growing source of revenue for the state during this 10-year period. Federal revenues more than doubled — from $16.2 billion in 2000 (page 243) to $42.5 billion in 2010 (page 253). Those are unadjusted figures.

In fact, when you exclude federal dollars, state spending adjusted for population growth and inflation actually has gone down by 6 percent.

How did we arrive at that figure? The budget board also provided spending figures for "general revenue funds" — which excludes federal funds.

Unadjusted for inflation and population growth, state expenditures from general revenue funds were $27.3 billion in 2000 and $39.5 billion in 2010. That's an unadjusted increase of 47 percent. However, the budget board's adjusted figures show that the $39.5 billion in 2010 was worth $25.7 billion in 2000 dollars — which is $1.6 billion less, a 6 percent decline.

Revenues Less than Expenditures

The ad also says that "this year, Rick Perry’s spending more money than the state takes in." This is true, but the state has been able to balance its budget. For the 2010-2011 biennium, which just ended Aug. 31, state expenditures are estimated to be $187.5 billion, according to the Legislative Budget Board. And the state's revenues weren't enough to cover that spending. But the state has a balanced budget requirement in its constitution, so the Legislature has to find a way to make up the difference. For 2011, it used nearly $3.2 billion this spring from the "rainy day fund" and made budget cuts to cover what was a $4 billion deficit. For fiscal 2010, the state used billions in federal stimulus dollars to balance the budget.

Texas puts some revenue from oil and gas production taxes into the rainy day fund, officially called the Economic Stabilization Fund, which was expected to total $9.4 billion at the end of fiscal 2013, according to the state comptroller's estimate released in January. That's before the $3.2 billion withdrawal. The Legislature likely will have to tap the fund again in 2013, since the two-year budget passed doesn't include enough funding for Medicaid; it's about $4.8 billion short of what's needed. So, again, expenditures will exceed the revenues the state is expected to take in.

The ad also claims that Perry is "covering his deficits with record borrowing," but that's misleading. The rainy day fund withdrawals aren't "borrowing," since they don't have to be repaid. The state also sold $9.8 billion in tax-exempt notes in August, a move the Wall Street Journalcalled "the largest-ever short-term note offering by the Lone Star State." The money was mainly for school funding needed at the beginning of the school year, and the notes will mature Aug. 30, 2012. So, the sale was a "record," but the so-called "borrowing" will have to be repaid within the year.

While the amount may have been unusual, the practice of issuing such notes is not. The Journal said: "Such notes typically mature within one year and are generally issued by states at the start of their fiscal years to raise cash ahead of incoming tax and revenue receivables for that year."

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